Rank: Elder Joined: 2/26/2012 Posts: 15,980
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VituVingiSana wrote:murchr wrote:VituVingiSana wrote:sparkly wrote:Mangs wrote:sparkly wrote:jerry wrote:sparkly wrote:Mangs wrote:When you look carefully beneath the ARM debt gloom, you will see the opportunity to board. The huge loss was a result of the huge (foreign-currency denominated) debt that was made worse by our weak shilling during the financial period. The company is fundamentally solid. So while the bad news is being peddled around by mainstream media regarding the huge loss, most investors are being blinded and end up ignoring the revenue that was registered from their operational activities. You contradict yourself I see no contradiction. Huge foreign currency denominated loans and weak currency = Weak fundamentals for the company. A weak shilling is a macro-economic factor, not a fundamental factor. A debt can be cleared and for ARM's case that issue is already being addressed. I would only be worried as an investor if there is a worrying change in the company's strategic operations. As it is, the company is fundamentally solid. What are fundamentals?? Let's start with that definition. To me, a highly indebted company at the mercy of macro factors is not fundamentally sound. @VVS, waiting for you to weigh in on this debate. All firms are somewhat affected by macro-economic factors. High levels of debt help supercharge profits when the econ (sales) is 'good' and the interest rates low. The problems always show up when the tide goes out. I am trying to paraphrase Warren Buffett. Debt isn't bad but it is risky. On the other hand, how does a manufacturing firm grow without debt? [Assume there's limited equity available] Warren Buffett does not like debt and does not like to invest in companies that have too much debt, particularly long-term debt. Not true. He doesn't like EXPENSIVE debt. He is happy to borrow at rates that are below what he can generate. In March 2016, BH sold $9bn in bonds. http://www.bloomberg.com...o-repay-10-billion-loan
Warren Buffett’s Berkshire Hathaway Inc. sold $9 billion in debt, the conglomerate’s biggest bond deal ever. Proceeds will help pay down a $10 billion loan used to finance its purchase of Precision Castparts Corp."The longest part of the sale was $2.5 billion of 3.125 percent of 10-year bonds"In 2013 "The company’s Berkshire Hathaway Finance Corp. sold five-and 30-year securities offering the company’s lowest coupons for those maturities ever."Buffett wrote:“You can’t get anywhere by paying 18% or 20% on what you owe, but you can make a lot of money charging that to someone else. You don’t want to be on the bad side of that equation.” In 2013, “When we borrow money, we’re thinking in terms of long maturities,” Buffett said in a Fox Business Network television interview on May 6. “Anybody who’s borrowing money now should borrow out for a long period of time.”
Buffett wrote:"When leverage works, it magnifies your gains. Your spouse thinks you're clever, and your neighbors get envious," explained Buffett in his 2010 shareholder letter. "But leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade — and some relearned in 2008 — any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people." I guess he's like everyone else, says one thing and does the other. BUT Quote:Buffett said Berkshire would spend $23 billion of cash to finance the Precision Castparts purchase, and borrow the rest. that debt to asset ratio is perfect. "There are only two emotions in the market, hope & fear. The problem is you hope when you should fear & fear when you should hope: - Jesse Livermore
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